Tax hike could expose Kyle to rollback vote

KYLE – All seems quiet in Kyle right now while the city staff and city council work on raising the property tax rate nearly 40 percent.

It remains to be seen whether that sense of calm survives the three months following Sept. 16, which is the day on which the city council will fix the tax rate and budget for Fiscal Year 2009. Almost certainly, the city is leaving itself open to a rollback election, a prospect that apparently worries no one on the Kyle staff or council.

The council and staff are in lock step favoring a substantial a property tax increase, which has gone up during the budget process in the last month. After recommending a rate of 35 cents per $100 of assessed value at the end of July, the staff came back recommending 37.31 cents last week.

If the city settles on a tax rate beyond the rollback rate of 33.29 cents, then state law allows voters to hold an election that would “roll back” the rate to that amount. Voters would have to present a petition with signatures from 10 percents of the city’s registered voters, which would come to slightly more than 900 signatures. If the city determines that the petition has enough legitimate signatures, or if the city does nothing within 20 days of receiving the petition, then the city must call an election within 30 to 90 days.

But when the council voted to publish a guaranteed maximum tax rate of 37.31 cents Tuesday night, the only opposition came from council members who said the guaranteed maximum wasn’t high enough. Thus, the guarantee passed by only a 3-2 vote, with Councilmembers Michelle Lopez and David Salazar both saying the council should give itself more wiggle room while working out the final budget details.

The council is required to set a maximum tax rate and publish it in a newspaper of general circulation before setting the true tax rate. By declaring 37.31 cents as the maximum, the council is prohibited from going beyond that rate, though it can settle on a lower rate.

A year ago, at the end of 11 straight tax rate reductions, the city set its property tax rate at 27.07 cents for FY 2008. But bills are coming due for $60 million in debt Kyle issued for capital improvement projects in recent years, while staff seeks to add 26.5 full-time equivalent positions. Among the new positions are six police officers to go with another five police officers who haven’t yet been hired because the city is transitioning to civil service rules.

The maintenance and operations (M&O) side of the tax rate would go up from 12 cents to 17.31 cents, while the interest and sinking side (I&S) would increase from 15.07 cents to 20 cents. In total, the property taxes would help fund a $33.3 million budget, with $17.5 million going to debt service.

“It is a significant increase,” Kyle City Manager Tom Mattis said. “But it’s an increase we believe is warranted. We’ve reached the point where we can’t advance the operation and provide the services for the same amount of money.”

The city borrowed in recent years for more than a dozen big ticket items, including the construction of Kyle Parkway, a new city hall, an east side fire station, a re-alignment of SH 150, infrastructure improvements to facilitate the Seton Hospital development and projects for the original part of town such as downtown streetscaping and sewage upgrades.

“We celebrated the opening of FM 1626 (Kyle Parkway),” said Councilmember David Wilson as he motioned for the 37.31-cent guaranteed maximum. “We celebrated the H-E-B, the news about Target and Kohl’s, the possibility of a sales tax base and a hospital for our citizens. Now is the time to pay for it.”

Said Mattis, “I don’t think anyone who lives in town would look at these projects and say we don’t need them.”

The rollback rate is calculated as tax rate necessary to pay debt service, plus raise the same amount of taxes for operations as in the previous year, plus add eight percent to the operations budget. Based on those amounts, the rollback rate for Kyle would be 39.28 cents. However, Kyle also is required to factor in a sales tax adjustment of 5.99 cents, reducing the rollback rate to 33.29 cents.

Kyle has to factor in the sales tax adjustment because it claims its entire sales tax haul for the general budget. As a contrasting example, Buda designates part of its sales tax for a so-called “4B” corporation (the Economic Development Corporation), so Buda doesn’t have to make the same sales tax adjustment for determining its rollback rate.

Mattis said the proposed property tax rate puts Kyle at about the rate it levied four years ago, adding that it’s still lower than most comparable Central Texas cities levied for the present budget year. For market comparison purposes on a number of fronts, Kyle looks at Schertz (40.9 cents for FY 2008), Cedar Park (51.8), Seguin (46.1), Georgetown (37.0), San Marcos (47.0), New Braunfels (41.0), Universal City (52.6), and Pflugerville (62.4).

The city council will conduct budget workshops on Aug. 28 and Sept. 9, with public hearings on Aug. 28 and Sept. 2.

“I’m of the opinion that we still have to look at the (M&O) rate and try to decrease it,” Councilmember Ray Bryant said.